BUSINESS LIVE / 04 OCTOBER 2018 - 05:03 / SIBONGISENI MBATHA
The 10% representation threatens SA’s rainbow nation vision
The creation of a multiracial capital distribution system in SA is no longer an option but an imperative in facing the existential threat to the vision of a rainbow nation from 24 years ago. It is a pity that even though the asset management industry is at the heart of capital flows in our country, only 10% of assets are in the hands of black-owned managers.
Colour code: There is some resistance to change in the asset management industry which is being reinforced by racial stereotyping from those with the means to communicate. Disaster awaits if steps are not taken to correct SA's imbalanced distribution of capital. Picture: 123RF/RABIA ELIF AKSOY
History has proven repeatedly that for dominance or oppression to endure the oppressors or colonisers need effective control over the means of production, particularly the flow of capital. The result has been the perpetuation of an economically unequal society as we see it today, in some cases by portraying whiteness as an automatic confirmation of investment management skills.
For example, when the 27four Investment Managers BEE.conomics annual survey found that the asset management industry was not making meaningful progress in transforming itself, Business Day columnist Stephen Cranston described the black economic empowerment (BEE) sector as a “ghetto” that some will leave to operate in a wider world because clients and consultants like a blend of skills rather than a politicised black firm.
This misleading interpretation to suit a specific agenda ignores the fact that 80% (119) of the black firm portfolio managers are black. How is this overwhelming black representation not recognised in the management of the R490bn?
Spanish philosopher George Santayana once said: “Those who cannot remember the past are condemned to repeat it.” When Afrikaners emerged from the two Anglo-Boer wars, battered and poor, they established the Afrikaner Broederbond, which later led to the creation of Sanlam and Volkskas, which became Absa, to realise an empowerment vision that changed the lives of future generations forever.
The surpluses derived from the insurance industry underwriting profits over all those years were used as a foundation for the establishment of the asset management industry we know today. The asset management industry funded many businesses that came to the JSE to raise capital.
It is against this instructive backdrop of the 76-year Afrikaner success story that the effort by black professionals to create a new platform for distribution of capital in SA should be supported.
The black professionals who desired to establish their own investment firms were inspired not only by their entrepreneurial drive but by two other relics of their bitter history: the reluctance of predominantly white incumbent firms to meaningfully recognise the skills and contributions of black professionals on an equal basis with their white peers; and the desire for black professionals to empower and inspire their black communities, just like the Afrikaners of 1918 did for their own communities.
In a country where the majority of the working class is black, it cannot be acceptable that only 10% of investable assets are managed by black firms 24 years after the dawn of democracy.
The process of changing the distribution of capital is often difficult and requires unceasing determination and resolve by the previously oppressed and dispossessed to reassert their right to economic benefits in the land of their birth. It is a pity that there appears to be resistance to change in the asset management industry, which is somewhat perpetuated by racial stereotyping from those with the means of communication.
We believe the efforts to transform the industry need to be embraced as they provide us, as a country, with a once-in-a-lifetime opportunity to create a success story from our past.
It is therefore unfortunate to see these efforts being undermined through racially biased, misinformed articles in the media or the untransformed asset allocation value chain.
So, how can we transform the asset management sector? As the lead custodian of black professionals’ interests and black business in the financial services sector, the Association of Black Securities & Investment Professionals (Absip) believes there are a few steps that can be taken to bring about the necessary transformation. These include legislation to prescribe minimum allocations to qualifying black investment firms; retirement funds becoming compulsory signatories to the Financial Services Sector Charter; industry incumbents being incentivised to consider sharing some of their distribution infrastructure with black firms in return for enterprise development points under the new BEE codes; and society standing together in vigorously demanding the creation of a multiracial capital distribution mechanism for a prosperous economy for all.
Absip believes that the sooner the management of capital flows is in the hands of black and white firms and individuals in equal easure the sooner we will see long-lasting improvements in the performance of the SA economy.
If we do not transform the asset management sector we are laying the foundation of a deeply unequal society for the next 100 years. The black firms have made conscious efforts to mirror the diverse demographics of SA, rather than simply seeking to rearrange the deck chairs. This is something all South Africans should encourage, support and celebrate.
• Mbatha is president of the Association of Black Securities and Investment Professionals.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER